Chapter 7 Enhanced Lecture Slides Metrics Exhibits and Tables Copyright © 2000 by Marketspace LLC

Exhibit 7-1: The Balanced Scorecard -- Strategy Into Operational Terms Financial To succeed financially, how should we appear to our shareholders? Customer To succeed financially, how should we appear to our shareholders? Internal Business Process To satisfy our shareholders and customers, what businesses must we excel at? Vision and Strategy Learning And Growth To succeed financially, how should we appear to our shareholders? Source: Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review 74 (January-February): 76, 1996

Exhibit 7-2: The Performance Dashboard Steps of Strategy Market Opportunity Assessment Business Model Customer Interface Branding and Implementation Evaluation Opportunity Metrics Business Model Metrics Branding and Implementation Metrics Customer Interface and Outcome Metrics Financial Metrics Performance Dashboard

Supporting Slide 7-A: Introducing the Performance Dashboard Steps of Strategy: Market Opportunity Business Model Customer Interface Implementation and Branding Evaluation Performance Dashboard: Market Opportunity Business Model Implementation and Branding Customer Financial Areas Addressed: Size of market opportunity Attractiveness of target segments Competitive landscape Uniqueness of value proposition Attractiveness of offering Firm capabilities relative to competition Sustainability of competitive position Branding Technology infrastructure Internal organization Relationship with suppliers and partners Fulfillment capability Customer acquisition Changes in customer behavior Site experience and usability Revenue Profit Cost Balance sheet

Exhibit 7-3: Life Cycle of a Company Startup/Beta Customer Acquisition Monetization Maturity 6 Months - 1 Year 1 Year - 2 Years 2 Years - 5 Years > 5 Years Strategy Develop a platform for rapid growth by building a strong team and creating a flexible site Build market share as quickly as possible by aggressively spending on partnerships and promotion Increase revenues and customer lock-in by developing new revenue streams Control costs and optimize marketing expenditures to achieve profitable growth Examples* Business.com tnbt.com Mvalue.com Paypal.com Evite.com Yahoo Amazon.com Schwab AOL * At time of writing (3/2000)

Table 7-1: POV: Bill Gurley on the Power of Conversion Rates Source: J. William Gurley, “The Most Powerful Metric of All,” CNET News.com, February 21, 2000 URL: http://www.news.com/Perspectives/Column/0,176,403,00/html?tag=st.ne.

Exhibit 7-4: Blueprint to the Performance Dashboard Step One: Articulate Business Strategy Step Two: Translate Strategy Into Desired Outcomes Step Three: Devise Metrics Step Four: Link Metrics to Leading and Lagging Indicators Step Five: Calculate Current and Target Performance Market Opportunity Opportunity size? Competitive environment? Market Opportunity Market size and growth Average age and income Competitor concentration Business Model Unique value proposition? Capabilities vs. competition? Business Model Customer perceived benefits Exclusive partnerships $ invested in technology vs. competition For each metric, determine the metrics that it affects and that affect it Map the linked set of metrics, indicating leading and lagging indicators Ensure that there is a balance between leading and lagging indicators For each metric, calculate current level of performance Determine target level required to meet outcomes described in Step 2 Ensure that targets are consistent with each other Implementation and Branding How to develop brand? How to go to market? Implementation Customer brand awareness System uptime percentage Number of IT staff % inaccurate orders Define goals and value proposition Develop resource system required to deliver the strategy Customer How to acquire customers? How will customers change? The customer experience? Customer Market share Purchase/year Success rate Service requests/customer Financial Financial consequences in terms of revenue, profit, cost and balance sheet? Financial Revenue Profit Earnings per share Debt to equity ratio

Table 7-2: US Top 25 Web and Digital Media Properties (March 2000) Source: Media Metrix (www.mediametrix.com/usa/press/releases/20000424.jsp), March 31, 2000

Exhibit 7-5: Market Research Source -- Bizrate.com

Exhibit 7-6: Analyst Source -- Forrester

Exhibit 7-7: Financial Information Source -- Hoovers Online

Supporting Slide 7-B: Point-Counterpoint: Which is Better -- Online or Offline Data Sources?

Supporting Slide 7-C: Point-Counterpoint: Which is Better -- User-Based or Expert-Based Research Content?

Exhibit 7-8: Mapping Internet Research Onto the Performance Dashboard Financial Information Market Research Analyst Market Implementation Customer Financial

Exhibit 7-9: Metrics for Seamless Online/Offline Customer Purchase Process Awareness Awareness of offline offer vs. awareness of online offer Knowledge Perceived benefits of Web vs. offline offer Pre-Purchase Information Available offering information online vs. offline Currency of information online vs. offline Evaluation of Alternatives Purchase Security and privacy associated with purchasing Purchase Customer service Response time online vs. offline Satisfaction Loyalty Post-Purchase Customer loyalty incentive programs online vs. offline Disposal Exchange policies online vs. offline

Information Sharing Fulfillment Systems Table 7-3: Metrics for Seamless Internal Business Processes and Operations Information Sharing Ability to open accounts online and offline Ability to access accounts online and offline Integrated customer databases Fulfillment Systems Seamless order processing Seamless order tracking Integrated inventory keeping

Online Investment Process Exhibit 7-10: Charles Schwab -- Customer Acquisition Stage Step 1: Articulate the Business Strategy “Use technology to offer innovative products and superior service at lower prices to investors unwilling to pay for investment advice” Innovative products 3. Resource System 1. Value Proposition Technology Leadership Low price 2. Marketspace Offering Schwab Learning Center Live Events Principles of Investing Understanding Market Cycles “Did You Know” Q&A Schwab Signature Services Schwab AdvisorSource Options Service Global Investing Service Online Chat with Customer Service Representatives Customer Service via Phone Customer Service via E-mail Customer Service at Branch My Watch List Margin Loans Money Transfers Automatic Investing After Hours Trading Account Protection Bill Payment Overall General Goal Planner Investor Profile Sample Investment Plans Retirement Retirement Planner IRA Analyzer Product Offering Online Investment Process Get Educated About Investing Plan investments Decide on Investment Perform Investment Post Investment Support Perform Research Estate Estate Tax and Probate Calculator Alternatives Comparison College College Planner Tax Tax Strategies IRS Withholding Calculator Quotes and Charts Analyst Center Stocks and Options Stock Analyzer Bonds and Treasuries Schwab BondSource Services CDs and Money Markets SchwabOne Annuities Schwab Select Annuity Life Insurance Insurance Needs Calculator Superior service High-quality Investment Information

Exhibit 7-11: Schwab Desired Outcome Summary Martket Opportunity Significant Opportunity Financially Attractive Segment Competitively Attractive Segment Financial Evaluation Revenue Profit Cost Balance Sheet Business Model Value Proposition vs. Competition Offer vs. Competition Capabilities vs. Competition Sustainability of Value Proposition Business Model Implementation and Branding Brand Associations vs. Competition Best-in-Class IT Infrastructure Ability to Deliver Brand Promise Customer Interface and Outcomes Lower Customer Acquisition Costs Transition Customer Base Outperform Competition on Interface Perceptions Customer Satisfaction and Loyalty

Exhibit 7-12: Charles Schwab -- Customer Acquisition Stage Market Opportunity Business Model Implementation and Branding Customer Financial Avoid crowded markets Provide unique VP Build brand Acquire new customers Increase revenue Target attractive segments Provide attractive offering Invest in technology Increase usage Increase system uptime Play in attractive market Leverage capabilities to deliver offering Increase number of IT staff Increase customer satisfaction Optimize cost Train branch staff Improve customer service Increase customer loyalty Increase profit

Table 7-4: Charles Schwab -- Customer Acquisition Stage Current and Target Levels for Select Metrics *Source: Nicole Tempest and Warren McFarlan, Charles Schwab Corporation (B). Case no. 9-300-507, Harvard Business School Publishing, September 13, 1999